EXERCISE $7-13$ Computing ABC Product Costs LO$7-3,$ LO$7-4$

Fogerty Company makes two products $-$ titanium Hubs and Sprockets. Data regarding the two products follow:

$\backslash$table$[[,\backslash$table$[[$Direct$],[$Labor$-$Hours$],[$per Unit$]],\backslash$table$[[$Annual$],[$Production$]]],[\backslash$table$[[$Hubs $....],[$Sprockets$]],\backslash$table$[[0\mathrm{.}80],[0\mathrm{.}40]],\backslash$table$[[10,000$ units$],[40,000$ units$]]]]$

Additional information about the company follows:

a$.$ Hubs require $$32$ in direct materials per unit, and Sprockets require $$18.$

b$.$ The direct labor wage rate is $$15$ per hour.

c$.$ Hubs require special equipment and are more complex to manufacture than Sprockets.

d$.$ The ABC system has the following activity cost pools:

$\backslash$table$[[$Activity Cost Pool $($Activity Measure$),\backslash$table$[[$Estimated$],[$Overhead$],[$Cost$]],$Activity$],[$Hubs$,$Sprockets,Total$],[$Machine setups $($number of setups$),$$$72,000,100,300,400],[$Special processing $($machine$-$hours$)...,$$$200,000,5,000,0,5,000],[$General factory $($organization$-$sustaining$).,$$$816,000,$NA$,$NA$,$NA$]]$

Required:

Compute the activity rate for each activity cost pool. Did you compute an activity rate for all of the activity cost pools? Why?

Determine the unit product cost of each product according to the ABC system.